Changes to pension

[Kendhni]

Story here
A bit late to make much of a difference to me but long overdue .. personally though I would also like to see them reverse the taxes Gordon Brown put onto pensions as well.

One concern I would have though is will the providers take the opportunity to raise ultra low rates that some companies negotiate to recoup any losses? For example I believe I currently pay fees of 0.3%.

[david63]

Another concern would be if higher fees = higher returns and lower fees = lower returns - it could be a case of "you gets what you pay for"

[Frank Manning]

Not to mention Market Revaluations, another big fiddle, used to reduce the final pension pot. I am afraid that I have a low opinion of the entire financial services industry following my experience of them in 2003/2004. I am so glad that I stayed in SERPS, otherwise I would have been putting even more into that dodgy private pensions industry.

[Silver_Shiney]

Another concern would be if higher fees = higher returns and lower fees = lower returns - it could be a case of "you gets what you pay for"

No worries, it doesn't work like that. The returns are achieved by growth (or not) within the investment itself, and this is outside the control of the fund manager. Investment funds are made up from the purchase of stocks and shares in many different companies within a particular "sector". It is less risky for a fund manager to do this than it is for an investor to purchase individual stocks and shares himself. The fund manager is paid to keep a close watch on the performance of those shares and, if a particular company has a poor outlook, he will sell and purchase shares in another company in that sector (for example, if a fund has holdings in food retail, he could buy shares in Sainsbury and Tesco. If Tesco looks like performing badly over the longer term, he will sell and reinvest in, say, Aldi. All this happens "behind the scenes" - the people investing in that fund will be largely unaware of the change).

The fee charged is a percentage of the fund value, so the better the fund performs, the higher the fee. If the fee is capped, then the onus is on the fund manager to keep an even closer watch on fund performance to ensure that it does the best it can, so he gets as much fee as possible.

[Silver_Shiney]

Not to mention Market Revaluations, another big fiddle, used to reduce the final pension pot. I am afraid that I have a low opinion of the entire financial services industry following my experience of them in 2003/2004. I am so glad that I stayed in SERPS, otherwise I would have been putting even more into that dodgy private pensions industry.

Frank, the only thing dodgy about it is if the IFA advised you to invest in high-risk funds close to retirement. I am self-invested (ie I went to a pension provider and told them exactly where to put my money and I move it around myself). Some of my funds have lost around 50% (but longer term they should perform very well) but overall my pension pot has grown by nearly 30% in less than three years. People at the start of their working life should have around 20% in high-risk funds, because they have the potential to make great returns over 20-30 years, but the closer one gets to retirement, more and more of the capital should be moved to lower-risk funds and, eventually, a cash fund.

I've said this elsewhere before, but do not ever take the annuity that your pension provider offers - always take the Open Market Option and shop around. Annuity rates vary widely and are dependent on a range of issues: guarantee period (where the annuity provider pays your "pension" for a guaranteed number of years irrespective of your early death), whether you want it index-linked, whether you want a widow(er)'s "pension" (and, if so, how much), what your health is ... If you can delay annuity purchase, you will get a better rate (simply because you are closer to death).

[Ray Scully]

When I took early retirement, part of which was receiving a 'lump sum' from my company pension. I was inundated with the 'crooks in suits' all wishing to be my new best friend. They were offering advice available from the better newspapers and other easily accessible sources. For their munificence, they wanted to cream off up to 3% of the amount invested.
I thought it parasitic that an industry that does not manufacture, or hold any stock, can get away with ripping people off in such a fashion.


Ray

[Kendhni]

I have always wondered if Financial Advisors know anything more than anybody else ... the more I look into it and deal with them I am convinced they don't, as you say Ray, they just cream off.

[david63]

I have always wondered if Financial Advisors know anything more than anybody else ... the more I look into it and deal with them I am convinced they don't, as you say Ray, they just cream off.

The good ones do - although I will accept that if you are willing to invest [sic] several hours a day in studying the financial markets then you can probably do a pretty reasonable job yourself.

Incidentally - under new rules that came into force earlier this year IFAs now take a much smaller cut and are basically fixed fee based.

[Silver_Shiney]

When I took early retirement, part of which was receiving a 'lump sum' from my company pension. I was inundated with the 'crooks in suits' all wishing to be my new best friend. They were offering advice available from the better newspapers and other easily accessible sources. For their munificence, they wanted to cream off up to 3% of the amount invested.
I thought it parasitic that an industry that does not manufacture, or hold any stock, can get away with ripping people off in such a fashion.


Ray

Where on earth did they get your contact details from?

I absolutely hate unsolicited contact and refuse to deal with anyone who feels it is an acceptable way of conducting business.

[Ray Scully]

When I took early retirement, part of which was receiving a 'lump sum' from my company pension. I was inundated with the 'crooks in suits' all wishing to be my new best friend. They were offering advice available from the better newspapers and other easily accessible sources. For their munificence, they wanted to cream off up to 3% of the amount invested.
I thought it parasitic that an industry that does not manufacture, or hold any stock, can get away with ripping people off in such a fashion.


Ray

Where on earth did they get your contact details from?

I absolutely hate unsolicited contact and refuse to deal with anyone who feels it is an acceptable way of conducting business.

A couple had a relationship with my employer, goodness knows how the others found out. Anyway none of them let the side down, they were all out to screw the last penny they could from me.

Ray

[Frank Manning]

I took out 20 years of a company pension when I moved jobs; Hanson group had tried to take over the firm, because the pension fund was over subscribed and I thought they wanted to get their sticky little hands on it, then the firm took a pensions holiday and the value started to slide. I placed it with Legal and General; big mistake. When I came to retire they started revaluing it and when I looked at open market options they dragged their feet over handing it over for months on end. In the end my IPA had to threaten to go public to get it out. Luckily I had by then re joined another company scheme, and that proved to be a good bet. I was still very glad that I had not contracted out of SERPS, because they paid up just as much as I was offered in an annuity.

I agree Ray. It is a culture of lining their pockets from playing with other people's money. However my bank are treating me to a day out soon, so I am not going to refuse that.

[Silver_Shiney]

A couple had a relationship with my employer, goodness knows how the others found out. Anyway none of them let the side down, they were all out to screw the last penny they could from me.

Ray

I would respectfully suggest that your employer broke confidentiality in giving your details away. I would take him to task (but then, I'm a cantankerous git!)